Silver's on the move, and gold better hang on!

Another great week to be long this "Commodities Super-Cycle" as multiple commodities broke out to new contract highs. If you have been reading our daily note called the "Morning Express," you would already know that the rising commodity prices front runs the inflation data making it essential to keep adding incrementally on corrections to commodities. My recommendation would be to focus mainly on energies and industrial metals.

The explosive CPI data released Wednesday marked the largest monthly gain since 1981 on the heels of the rapid reopening. The report's focus showed that Airlines, Auto, and Lodging saw the biggest price increases along with constrained supplies, explosive demand aligned with aggressive monetary and fiscal policy. You are probably asking yourself by now, Why am I getting all Macro on you? Because the chart below is going to be the one you need on your radar. To further help you, we created a free "Gold Trends Macro Book," which has been updated with silver slides. This monthly updated booklet will provide you with all the quantitative analyses of the precious metal's markets. You can request yours here: Free Gold Trends Macro Book.

Weekly Gold/Silver Ratio

If you can get the Macro backdrop correct, you can get the dollar right, get treasury yields right, and spillover effect into the things you care about, i.e., Gold and Silver. With faster economic growth and accelerating inflation, we should see the yield curve ramp-up to new cycle highs. That is where the industrial demand for Silver kicks into high gear, and Gold tries to hang on for dear life. For the past two decades that I have been trading, writing, and covering the precious metals markets, we have always seen Silver act as the victim of Gold price movements and due to the nature of leveraged short-sellers. Well, this time around, looking at CFTC non-commercial net long positioning, we can identify that Gold has roughly half as many net longs as its one-year average while Silver is quietly is building week over week. Rising yields will lead to continued "trimming" of Gold longs; however, the price of Gold may not see the sizable correction one would expect and actually will "drift" higher due to the rising demand for Silver as an asset. While Gold is just a currency that sits in a vault collecting zero interest, Silver, on the other hand, acts as an inflation hedge and industrial metal. In preparation for the next "Breakout" in Silver, we are constructing Bull Call Spreads using the futures contract for exit timing flexibility along with manageable leverage. If you would like to learn more about the strategies we are implementing or learn more about technical analysis, we created a guide to provide you with all the steps to create an actionable plan used as a foundation for entering and exiting the market. You can request yours here: 5-Step Technical Analysis Guide to Gold.
 

By Phillip Streible

Contributing to kitco.com

Kinesis Money the cheapest place to buy/sell Gold and Silver with Free secure storag

David

Gold has the 'green light' as inflation heats up analysts look for break above $1,850

Analysts are still watching gold's $1,850 level closely as inflation pressures start to heat. Still, the uncertain economic outlook forces the Federal Reserve to remain patient and maintain its ultra-loose monetary policies.

Analysts have said that gold is in a sweet spot as more investors look for an inflation hedge. The renewed interest in gold comes after annual U.S. CPI rose 4.2% last month, its most significant increase in 13 years. Meanwhile, Thursday, U.S. producer prices rose 6.2% for the year, the biggest increase on record.

Bart Melek, head of commodity strategy at TD Securities, said that although inflation is rising, it is still too soon to tell if it will be more permanent or transitory, which is in line with expectations from the Federal Reserve.

Melek added that TD is currently in the camp that inflation will be transitory. He explained that while commodity prices continue to push higher, there is enough spare capacity in the global economy to accommodate this new bull-market cycle.

"We think the Federal Reserve will be quite comfortable looking through the latest inflation numbers," he said.

With inflation on the rise and the U.S. central bank looking to hold the line on its monetary policy, Melek said that it is only a matter of time before gold prices push above $1,850 an ounce. He added that if that price level breaks then the next primary target would be the January highs above $1,900.

Sean Lusk, co-director of commercial hedging at Walsh Trading, said that he is bullish on gold as inflation is "real."

He added that while there is a threat that rising inflation will push bond yields higher as fixed-income traders start to anticipate the Federal Reserve raising interest rates.

However, he added that any dip in the gold prices because of rising bond yields is a buying opportunity.

"Uncertainty abounds and that that is why the Fed will be hesitant to tighten monetary policy and that will be good for gold," he said. "Even if the Fed does look too tight, there is no doubt they will be behind the curve. Real interest rates will remain in negative territory and that is a good environment for gold."

Carsten Fritsch, precious metals analyst at Commerzbank, said in a note Friday that rising bond yields hitting 1.7% has held gold back from breaking above $1,850 an ounce. However, Fritsch also put the bond yields into perspective.

"Though U.S. bond yields climbed to as high as 1.7% [Thursday], they are still 2.5% lower than the current rate of inflation. Even if the latter falls again during the course of the year, real interest rates remain significantly negative. This is because continued ultra-expansionary monetary policy puts tight limits on any rise in bond yields," he said.

Fritsch said that he expects to see renewed speculative interest in the gold as prices have been "given the green light" to go higher.

Although inflation will be bullish for gold, Lusk said that the precious metal next week should also attract new safe-haven demand as geopolitical tensions continue to rise with the growing conflict between Israel and Palestinians in the Gaza Strip.

While the gold market is seeing some new bullish momentum in an inflationary environment, some analysts also note that the precious metal continues to face some headwinds, namely growing competition from cryptocurrency.

In an email to Kitco News, Mike McGlone, senior commodity analyst at Bloomberg Intelligence, describes the $1,850 an ounce level as a "rounding error." He added that the precious metal would be higher if it weren't for bitcoin.

 

McGlone added that with copper prices hitting all-time highs, gold prices should actually be trading around $2,300 an ounce.

"Gold has reached an inflection point of replacement in investment portfolios by Bitcoin," he said. "Gold going to be boring for a while as the excitement and upside potential is shifting towards the new digital upstart – Bitcoin."

 

Data to Watch

According to analysts, with all eyes on inflation, investors will be eager to see what the Federal Reserve is watching as the minutes of the April monetary policy meeting will be released Wednesday.

Markets will also receive further U.S. housing construction and sales data and preliminary manufacturing numbers.

 

By Neils Christensen

For Kitco News

Kinesis Money the cheapest place to buy/sell Gold and Silver with Free secure storage

 

David

LBMA overstates silver inventories, gold price stalls despite record inflation, what’s going on?

Bullion Market Association (LBMA) overstated their silver holdings in April, an error which they later rectified.

Previously, they had reported 1.15 billion Troy ounces of silver in stock, when in fact the correct figure is 1.14 billion Troy ounces.

In a statement released to Kitco News, the LBMA stated that “The incorrect information regarding March silver stocks, which has now been amended, arose from an incorrect data submission. There is no link between this reporting error in March and the activity in the silver market at the end of January.

LBMA is working to ensure such a mistake does not occur in the future. We are reviewing internal submitter controls, as well as looking at controls in place for trade reporting and other market stock reporting that can potentially be brought across to safeguard precious metal vault stock submissions.

Currently, LBMA queries any submission which is off-trend (i.e. substantially higher/lower) than previous submitted numbers and asks for the submitter to reconfirm their numbers. This check is in place to avoid any miscalculations or “fat finger” errors arising. This process was followed during the March data submission. However, when rechecking this number, prior to submission of April silver stocks data, the submitter identified and disclosed the error, which was immediately rectified by the LBMA.”

Jeff Christian, managing partner of CPM Group, said that this was an accounting error.

“It looks like an accounting error, a mistake on the part of one of the depositories reporting to the LBMA how much metals they had at the end of the month. It doesn’t look like it had anything to do with attempts to squeeze market,” Christian told David Lin, anchor for Kitco News. “We talked to the LBMA, we talked to some depository managers, and it looks like it was a mistake.”

On the gold market, Christian noted that while gold did not rally this week on the release of the higher-than-expected headline inflation numbers of 4.2%, the yellow metal did rise all month on the back of higher inflation expectations already.

Importantly, interest rates rose significantly on the news, with the 10-year U.S. Treasury bond yield hitting 1.7% Thursday, while the market digests the fact that inflation may not be persistent, and only temporary, as 4.2% inflation on an annualized basis uses last year’s very depressed prices as a base.

More broadly speaking, Christian said, gold does not react to inflation as much as it does to other factors, including real interest rates, investment demand, and geopolitical risks.

For more information on Christian’s outlook on the gold price and his assessment of current global geopolitical risks, watch the video above.
 

By David Lin

For Kitco News

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David

Gold scores fractional gains even though the dollar recovered from the lows of the day

As of 5:15 PM EST, the most active June 2021 contract is currently fixed at $1838.40, which is a fractional gain of $0.80 on the day. However, the real news in trading today was the intraday low that came in at $1817.80 before recovering over $20 to close with modest gains on the day. Gold made a trade to a lower high than yesterday, but market participants focused immensely on the selloff that occurred during the trading session.

Much of today’s selloff was directly related to the U.S. 10-year Treasury note, which now is yielding 1.62%. Gold also recovered as the U.S. dollar traded to a low of 89.95 and recovered unchanged at 90.185. Even though the dollar closed unchanged, it did make a lower low than the previous day. In fact, the last time the dollar traded below 90.00 was on February 25 of this year. In January, the dollar index traded to its lowest value this year, hitting an intraday low of 89.15.

The fact that we are now witnessing gold solidly above $1800 expresses a strong change in market sentiment from neutral to bullish. Considering that before we saw gold rise above $1800, it was mired in an extremely narrow trading range that was defined by support at the 21-day exponential moving average and resistance occurring at the 100 – day moving average. During the beginning of May, we had multiple occurrences in which market participants were able to move gold pricing just below the 100-day moving average, which then was at approximately $1800 and is now fixed at $1797.20.

The break above $1800, which occurred on May 6, took gold from an opening price of $1787 and then closed solidly above $1800, closing at $1816 on May 6. This was followed by another dramatic rise in gold pricing, with gold opening just above the closing price of May 6 and closing at $1832 on Thursday of last week. Yesterdays and today’s trading activity created two consecutive Japanese candlesticks called a “Doji.”

This type of candlestick can be found at market tops and bottoms as the pivotal candle indicating a key reversal. However, they are also prevalent after a market has made a sustained move to higher or lower ground and consolidates at that new price point.

In the case of the last two trading days, my interpretation is that we are witnessing a period of consolidation. This is based on our technical studies, which indicate that major resistance does occur until approximately $1855. This is the most logical point on a technical basis where we could see resistance occur. Up until that price point, there are no major levels that we can identify as strong resistance. Therefore, I believe we will see gold continue to move higher, at least until $1855.

By Gary Wagner

Contributing to kitco.com

 

Kinesis Money the cheapest place to buy/sell Gold and Silver with Free secure storage

 

David

Gold price sees best week in 6 months

Gold rose more than $70 this week after finally cracking the psychologically important $1,800 an ounce level. Gold hit a 10-week high on much weaker-than-expected U.S. employment data, a lower U.S. dollar, and a retreat in U.S. Treasury yields. Here's a look at Kitco's top three stories.

. After hitting the $1,800 level, analysts were busy speculating what's next for gold. Many say there is momentum for higher prices, with growing inflation fears triggering risk-off trade into gold.

"With all the stimulus that is expected to come through, I can see why this narrative of more debt and higher inflation will continue to drive gold prices higher," said Robin Bhar, an independent market analyst.

2. Bank of America said that the metal's unprecedented run to 10-year highs of above $10,000 per tonne is just the start of a much larger move higher.

The bank is not ruling out copper hitting $20,000 a tonne as the market deals with significant supply crunch and growing demand. "If our expectation of increased supply in secondary material is wrong, inventories could deplete within the next three years, giving rise to even more violent price swings that could take the red metal above $20,000 per tonne," Bank of America said.

1. Legendary investor Sam Zell bought gold after spending his career asking: 'why would you want to own the metal?'

The 79-year-old American billionaire said he was pushed into buying gold due to concerns about fiat currency. "It has no income. It has costs to store, and yet when you see the debasement of the currency, you say, 'what am I going to hold onto?'" Zell told Bloomberg.

The U.S. is not the only country that is printing too much money. And one of the natural reactions is to buy gold, he added.

 

By Anna Golubova

For Kitco News

 

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David

Gold, silver power higher amid improving chart postures, weak USDX

Gold and silver prices are sharply higher and hit 10- and nine-week highs, respectively, in midday U.S. trading Thursday. The metals were lifted in part by a more bullish technical picture for both, a lower U.S. dollar index and U.S. Treasury bond yields backing off a bit from this week’s highs. June gold futures were last up $32.00 at $1,816.30 and July Comex silver was last up $1.023 at $27.55 an ounce.

The gold market pushed above what was key technical resistance at the $1,800.00 level and set off pre-placed buy stop orders in the futures market to propel prices even higher.

It could also be that increasing worries about global inflation becoming problematic in the coming months are prompting the buying of gold and silver as a hedge against serious inflationary pressures that could occur down the road. There are more and more clues surfacing to suggest inflation will rise beyond what central banks and governments want to see.

In another sign of stronger consumer and commercial demand for goods that adds to the inflation argument, shipping giant Maersk reportedly said there are not enough ships in the world to meet container shipping demand. Maersk handles around 20% of global container traffic. The shortage of container ships and problems with the location of many containers has helped to more than triple container rates over the past year.

The key outside markets today see the U.S. dollar index lower. Nymex crude oil prices are lower and trading around $64.85 a barrel. Meantime, the yield on the benchmark 10-year U.S. Treasury note is presently fetching around 1.58%.

The key U.S. data point of the week and arguably of the month comes Friday morning with the Labor Department’s Employment Situation Report for April. Non-farm payrolls are seen up 1 million compared to a rise of 916,000 in March. The unemployment rate is seen at 5.8% versus 6.0% in March.

Technically, June gold futures bulls have the overall near-term technical advantage and gained more power today. A five-week-old uptrend is in place on the daily bar chart. Bulls’ next upside price objective is to produce a close above solid resistance at $1,850.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,754.60. First resistance is seen at today’s high of $1,818.60 and then at $1,825.00. First support is seen at $1,800.00 and then at today’s low of $1,781.80. Wyckoff's Market Rating: 6.5

July silver futures prices hit a nine-week high today. The silver bulls have the overall near-term technical advantage and gained more power today. A five-week-old uptrend on the daily bar chart is in place. Silver bulls' next upside price objective is closing prices above solid technical resistance at $28.475 an ounce. The next downside price objective for the bears is closing prices below solid support at last week’s low of $25.745. First resistance is seen at today’s high of $27.585 and then at $28.00. Next support is seen at $27.00 and then at $26.765. Wyckoff's Market Rating: 6.5.

July N.Y. copper closed up 775 points at 460.15 cents today. Prices closed near the session high today and hit a contract and nearly 10-year high. The copper bulls have the strong overall near-term technical advantage. Copper bulls' next upside price objective is pushing and closing prices above solid technical resistance at 475.00 cents. The next downside price objective for the bears is closing prices below solid technical support at 430.00 cents. First resistance is seen at today’s contract high of 460.30 cents and then at 465.00 cents. First support is seen at 455.00 and then at 450.00 cents. Wyckoff's Market Rating: 9.5.

 

By Jim Wyckoff

For Kitco Newss

Kinesis Money the cheapest place to buy/sell Gold and Silver with Free secure storage

 

 

 

David

Gold and silver trade lower overnight leading into the European open

Gold and silver are trading marginally lower leading into the European open after a dismal session on Tuesday. Hawkish comments from Janet Yellen sent the yellow metal lower to trade -0.77% in the red during yesterday's session. Silver also moved -1.47% in the red and trades at $2635/oz this morning.

Japanese, Chinese, and South Korean markets were still closed due to public holiday's but the ASX rose 0.39% despite a negative lead from Wall Street. Some analysts attributed the gain to Yellen clarifying her earlier statement by saying she was not predicting or recommending a rate rise.

In FX markets, the dollar index was slightly firmer overnight after rising 0.35% in the prior session. The main mover has been NZD/USD 0.13% but the majors mostly traded within their ranges overnight. In the rest of the commodities complex copper is trading -0.11% lower and spot WTI moved 0.16% higher.

Looking at the news, Treasury Secretary Janet Yellen says she has regular meetings with Fed Chair Powell but believes strongly in Fed independence and she also reiterated "She Isn’t Predicting Higher Interest Rates". On the subject of cryptocurrencies, Yellen said we don't have an adequate cryptocurrency regulatory framework.

On the coronavirus front, a third COVID-19 vaccine shot will be offered to people over 50 in the UK.

Looking at some of the data overnight, New Zealand ANZ Commodity Price index for April +2.3% m/m (prior +6.1%) – NZ jobs report for Q1 showed the Unemployment rate hit 4.7% (vs. 4.9% expected).

In Australia, April construction PMI printed at 59.1 (vs. prior 61.8) and Australia April Markit PMIs, saw at services 58.8 (prior 55.5) & composite rose to reach 58.9 (prior also 55.5)

 

From central bankers, Fed's Kashkari says the Federal Reserve has powerful tools if inflation surprises higher.

Dallas Fed head Kaplan said yet again that a discussion of tapering should begin. This is not the first time Kaplan has stated that the Fed should start to look at tapering QE.

Lastly, RBNZ Deputy Governor Bascand says there is a greater risk of a house price correction. This comes after the RBNZ tightened lending rules.

Looking ahead to the rest of the session highlights include composite and services PMI's from the major nations, EU PPI, U.S. ADP NFP, and weekly DoE's. We could also get comments from Fed's Rosengren, Kaplan, Evans, Mester, BoC's Macklem, ECB's Lane, German Buba's Wuermeling, and BoE's Deputy Governor Woods.

 

By Rajan Dhall

For Kitco News

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David

Gold rallies but at least for now fails to trade above resistance

Gold futures had a strong and respectable gain in trading today, with the most active June 2021 Comex contract gaining just over $25 per ounce. As of 4:45 PM EST, the most active gold contract is trading up $25.50 and is currently fixed at $1793.20. After trading under pressure and closing lower last week, gold futures opened at $1768.10, which corresponds roughly to the close on Friday. Factors contributing to today's strong upside move are U.S. dollar weakness as well as slightly lower yields on the U.S. 10-year Treasury note. It must be noted that today's high of 1798.90 falls just shy of the current major resistance at $1800.

Currently, the dollar index is fixed at 90.95 after factoring in today's decline of 32 points (-0.36). Today's lower pricing gives back roughly half of the gains witnessed on Friday as the dollar index surged up approximately three-quarters of a percent.

Treasury yields had a slight fall losing approximately three basis points, and are currently trading at approximately 1.608. The higher 10-year note, which resulted in lower yields, was the result of the ISM manufacturing PMI report for April, which came in at 60.7. This was well below the economic forecast, which expected the number to be 65 or higher.

According to CNBC, "This compares to March's level of 64.7. The index measures manufacturing activity via a survey of more than 300 manufacturing company purchasing managers conducted every month by the Institute for Supply Management. IHS Markit U.S. manufacturing activity grew at a record-high speed in April, data from a survey compiled by IHS Markit showed Monday. April's Manufacturing Business Activity PMI Index came in at 60.5, above the 59.1 print in March."

Silver, spot and futures rally

Silver had the strongest percentage gains of all for precious metals (gold, silver, platinum, and palladium), gaining over 4% in futures trading today. Traders have moved to June now the most active contract. June silver is currently fixed at $27.01 after factoring in today's gain of $1.14. That amounts to a percentage gain of 4.43%. Spot or Forex silver is currently fixed at $26.87, which is the result of approximately $0.98, a net gain of 3.81%.

Copper futures continue their historic rally

Copper futures continued their historic price increase and are certainly within the range of taking out the all-time high that occurred during the first quarter of 2011. Although the all-time record high for copper futures is $4.65 per pound, the highest close on record of $4.4919 was taken out on a closing basis with today's large gains. In fact, if copper holds the gains established today on a weekly basis, it would be the highest closing price ever recorded for the highly used industrial metal.

According to MarketWatch, commodity strategists at Bank of America acknowledged that "The world risks "running out of copper" amid growing demand for the metal, paving the way for a spike in prices just as the global economic reopening gets under way."

In fact, according to this report, current inventories, which are measured in metric tons, now stand at a level seen 15 years ago. This, according to the report, implies that current stocks will only cover 3.3 weeks of demand, and as such, Bank of America strategists believe that the price of copper could rise to 13,000 per metric ton, which amounts to $5.89 per pound in the upcoming months. They're forecasting that the copper market's deficits which are seen as drops in inventory, will continue through 2022.

 

By Gary Wagner

Contributing to kitco.com

Kinesis Money the cheapest place to buy/sell Gold and Silver with Free secure storage

David